Viability Gap Funding for Offshore Wind Energy

Context: The Union Cabinet approved India's first offshore wind energy projects with a capacity of 1 GW (500 MW each) off the coast of Gujarat and Tamil Nadu, at a total cost of Rs 7,453 crore.

Offshore Wind Energy

• Offshore wind energy is clean and renewable energy obtained by taking advantage of the force of the wind produced on the high seas. 
• Wind reaches a higher and more constant speed on the high seas as compared to that on land due to the absence of barriers. 
• In order to make the most of this resource, mega-structures are installed that are seated on the seabed and equipped with the latest technical innovations.
• According to studies conducted by NIWE, there is good potential for development of offshore wind power off the Southern tip of India and off the West Coast for development of wind power in India’s coastline.

Benefits of Offshore Wind Energy

• Renewable, unlimited and non-polluting.
• Offshore wind energy turbines are much larger in size (5-10 MW per turbine) as against 2-3 MW of an onshore wind turbine.
• Reduces pressure on land resources.
• Barrier-free regions thus higher wind speed and efficiency
• Visual and acoustic impact is small
• No issues of land acquisition.
• Ease of maritime transport, which has few limitations about cargo and dimensions in comparison with land transportation, has made it possible for offshore wind turbines to reach much larger unit capacities and sizes than onshore wind turbines.

Challenges of Offshore Wind Energy

• The major issue lies in the challenges about high costs and technological challenges of offshore wind facilities owing to underwater construction constraints. Thus, making the per mega­watt cost of offshore wind turbines higher than the cost of onshore wind turbines.
• Construction and operations may disturb the delicate ecological landscape, which in turn may affect species and biodiversity. For ex. Identified area for project like Gulf of Khambhat is an ecologically sensitive zone. 

Global Standings

• As of 2023, China continues to be the global leader in offshore wind energy capacity followed by the United Kingdom and Germany.

India and offshore wind energy

• India has a coastline of about 7600 km surrounded by water on three sides and has good prospects of harnessing offshore wind energy. 
• Ministry of New and Renewable Energy (MNRE) is the nodal Ministry for the development of Offshore Wind Energy in India.
• MNRE has notified the ‘Offshore Wind Energy Policy’ in 2015 which provides a framework for the development of offshore wind power development up to a distance of 200 nautical miles from the baseline i.e., up to the country's Exclusive Economic Zone. 
• National Institute of Wind Energy (NIWE), Chennai is the nodal agency to carry out resource assessment; surveys and studies in EEZ demarcate blocks and facilitate developers for setting up offshore wind energy farms.
• For the initial phase of developments, potential offshore wind zones off the coast of Gujarat and Tamil Nadu have been identified through meso-scale study.
• A revised Strategy for the development of offshore wind energy projects has been issued in 2023. Further, The “Offshore Wind Energy Lease Rules, 2023” to regulate the allocation of offshore wind sea blocks to developers have been notified.
• India has set a target of installing 30 GW of offshore wind projects by 2030.  The government estimates that the states of Gujarat and Tamil Nadu alone have around 70 GW of potential for offshore wind power.
• While India’s onshore wind energy capacity has reached 42.633 GW (4^th highest in the world), offshore wind energy in the country is yet to gain momentum.
• Approved in June 2024, the Viability Gap Funding (VGF) scheme for offshore wind energy projects includes an outlay of Rs.6853 crore for installation and commissioning of 1 GW of offshore wind energy projects, and grant of Rs.600 crore for upgradation of two ports to meet logistics requirements for offshore wind energy projects.
• The VGF scheme is a step towards implementation of the National Offshore Wind Energy Policy notified in 2015 with an aim to exploit the vast offshore wind energy potential that exists within the exclusive economic zone of India. 
• The successful commissioning of 1 GW offshore wind projects will produce renewable electricity of about 3.72 billion units annually, which will result in annual reduction of 2.98 million tons of CO2 equivalent emission for a period of 25 years.